India hikes infrastructure capex for fourth year; Rs11.1tr set for 2024-25

MUMBAI (ICIS)–India’s government has announced plans to increase its capital expenditure on infrastructure projects to rupees (Rs) 11.1trn ($134bn) in its interim budget for 2024-2025, up 11% from the previous fiscal year, boosting the funds available for the sector for the fourth consecutive year.

In the previous budget – for the year ending March 2024 – infrastructure expenditure stood at Rs10tr, up 33% year on year.

The earmarked spending for infrastructure for the next fiscal year is expected to account for 3.4% of the south Asian economy’s GDP, Indian finance minister Nirmala Sitharaman said during her interim budget speech on 1 February.

The full and final budget for financial year 2024-25 will be presented in July, after the Indian general elections and formation of a new government in April-May 2024.

India’s infrastructure spending would build on “the massive tripling of the capital expenditure outlay in the past four years resulting in huge multiplier impact on economic growth and employment creation”, Sitharaman said.

The government has allotted Rs2.78tr to the Ministry of Transport & Highways for the development of road infrastructure across the country.

For the Indian Railways, Rs2.5tr has been allocated, to help the government achieve its plan to create three economic railway corridors for seamless transport of energy products, minerals, and cement as well as to improve port connectivity.

The government also aims to provide free electricity to 10m households through rooftop solar electricity.

Separately, the government will also support construction of 20m houses across rural India over the next five years. This move is expected to increase the consumption of construction-related segments like cement, steel, paints and petrochemical products like polyvinyl chloride (PVC), etc.

Based on the interim budget document, India’s nominal GDP growth for 2024-25 is projected at 10.5%, with the fiscal deficit as a ratio to GDP expected to narrow to 5.1% from 5.8% in the current fiscal year.

The government aims to reduce its fiscal deficit to below 4.5% by 2025-26.

India is the fastest-growing economy in the world, with real GDP growth for the year ending March 2024 projected at above 7.0%, which is expected to be sustained in the next fiscal year.

Focus article by Priya Jestin

($1 = Rs83.15)

Thumbnail image: Kite with the image of India Prime Minister Narendra Modi. Colourful Kite Making, Ahmedabad, Gujarat, India – 27 December 2023. India to hold general elections in April-May 2024. (Saurabh Sirohiya/ZUMA Press Wire/Shutterstock)